Process Costing System

7/26/2019 Process Costing System

1/16

[email protected]

Process Costing System - Exercises and Problems:

Learning b!ecti"e:

Pre#are the $ormat o$ cost o$ #rod%ction re#ort.

Calc%late e&%i"alent %nits o$ #rod%ction.

'hat is the treatment o$ normal and abnormal loss in #rocess costing system(

)o* the timing o$ normal and abnormal loss is considered in a cost o$ #rod%ction

re#ort(

+. Cost o$ Prod%ction ,e#ort:

com#anys /e#artment 0 costs $or 1%ne *ere:

Cost $rom /e#artment + 2+3405

Cost added in /e#artment 0:

6aterials 747+

Labor 3+55

actory o"erhead ;)< 8=

>he &%antity sched%le sho*s +0555 %nits *ere recei"ed d%ring the month $rom

/e#artment +? =555 %nits *ere trans$erred to nished goods? and 555 %nits in

#rocess at the end o$ 1%ne *ere 5A com#lete as to materials cost and 0Acom#lete as to con"ersion cost.

Required:Pre#are Cost o$ #rod%ction re#ort.

Sol%tion:

/e#artment 0

Cost o$ Prod%ction ,e#ort

or the 6onth o$ 1%ne +9BBB

%antity Sched%le:

Dnits recei"ed $rom de#artment + +0555

Dnits trans$erred to nished goods =555

Dnits still in #rocess ;5A materials 0A con"ersion< 555

Cost Charged to the /e#artment: >otal cost Dnit cost


2/16

[email protected]

Cost $rom #receding de#artment:

>rans$erred in d%ring the month ;+0555 %nits< 2+3405 2+.43

------- ------Cost added by de#artment:

6aterials 2747+ 27.=

Labor 3+55 3.85

actory o"erhead 8= =.+5

------- -------

>otal cost added 2+8595 2+8.7=

-------- -------

>otal cost to be acco%nted $or 2+=77+5 2+9.84

Cost cco%nted $or as ollo*s:

>rans$erred to nished goods ;=555 2+9.84< 2+488+5

'ork in #rocess ending in"entory:

Cost $rom #receding de#artment 23855

6aterials ;555 5A 27.=< ++70

Labor ;555 0A 23.85< 855

actory o"erhead ;555 0A 2=.+5< 88=

-------- 4355

--------

>otal cost acco%nted $or 2+=77+5

dditional com#%tations:

E&%i"alent #rod%ction:

6aterials =555 F ;555 G 5A< 955 %nits

Labor and $actory o"erhead =555 F ;555 G 0A< 805 %nits


3/16

[email protected]

0. Cost o$ Prod%ction ,e#ort - Hormal Loss:

or /ecember the Prod%ction Control /e#artment o$ Carola Chemical Inc. re#orted

the $ollo*ing #rod%ction data $or /e#artment 0:

>rans$erred in $rom /e#artment + 555 liters

>rans$erred o%t to /e#artment 4 4955liters

In #rocess at the end o$ /ecember ;*ith +J0 labor and $actory

o"erheadhe cost de#artment collected

$ollo*ing g%res $or de#artment 0:

Dnit cost $or %nits trans$erred in $rom de#artment + 2+.85

Labor cost in de#artment 0 20=05

##lied $actory o"erhead 2+785

Required: cost o$ #rod%ction re#ort $or de#artment 0 $or /ecember.

Sol%tion:

Carola Chemical Inc.

/e#artment 0


or the 6onth o$ /ecember. +9BBBB

%antity Sched%le:

Dnits recei"ed $rom #receding de#artment 555

Dnits trans$erred to next de#artment 4955

Dnits still in #rocess ;+J4 labor and o"erhead< +555

Dnits lost in #rocess 555 555

-------

Cost Charged to the /e#artment: >otal Cost Dnit Cost


4/16

[email protected]


>rans$erred in d%ring the month 299555 2+.85

-------- ------

Cost added by the de#artment:Labor K4955 F ;+J4 G +555< 74555 %nits 20=05 25.37

actory o"erhead 2+785 25.43

-------- ------

>otal cost added 274555 2+.55

d!%stment $or lost %nits 25.+8M

-------- ------

>otal cost to be acco%nted $or 2+70555 20.98


>rans$erred to next de#artment ;4955 G 20.98< 2++==+5

'ork in #rocess - ending in"entory:

Cost $rom #receding de#artment ;+555 G 2+.98< 205=95

Labor ;+555 G +J4 G 25.37< 0075

actory o"erhead ;+555 G +J4 G 25.43< +035 07095

-------- -------

>otal cost acco%nted $or 2+70555

Md!%stment $or lost %nits:

orm%la $or Calc%lation:

;Cost $rom #receding de#artments J Dnits $rom #receding de#artments - Lost %nits< -

Dnit cost $rom #receding de#artment

;99555 J 5555< - +.85 25.+8

,


5/16

[email protected]

;555 1.80) =29555 J 5555 25.+8

4. Cost o$ Prod%ction ,e#ort:

Nrooks Inc. %ses #rocess costing. >he costs $or /e#artment 0 $or #ril *ere:

Cost $rom #receding de#artment 205555

Cost added by de#artment:

6aterials 20+8+3

Labor ===3

actory o"erhead ;)< 7+57 44393

--------

>he $ollo*ing in$ormation *as obtained $rom the de#artments &%antity sched%le:

Dnits recei"ed 555

Dnits trans$erred o%t 7555

Dnits still in #rocess +555

>he degree o$ com#letion o$ the *ork in #rocess as to costs originating in

de#artment 0 *as: 5A o$ %nits *ere 75A com#lete? 05A *ere 45A com#lete? and

the balance *ere 05A com#lete.

Required:>he cost o$ #rod%ction re#ort $or /e#artment 0 $or #ril.

Solution:

Brooks Inc.

Department 2

Cost of Production Report

For the month of April, !"####

%antity Sched%le:


6/16

[email protected]



Dnits still in #rocess;40 labor and o"erheadotal Cost Dnit Cost


>rans$erred in d%ring the month 205555 27.55

-------- ------

Cost added by the de#artment:

6aterials 20+8+3 2.5

Labor K4955 F ;+J4 G +555< 74555 %nits 2===3 2+.85

actory o"erhead 27+57 25.9

-------- ------

>otal cost added 244393 2=.85

-------- ------

>otal cost to be acco%nted $or 24393 2++.85


>rans$erred to next de#artment ;7555 G 2++.85< 27=055


Cost $rom #receding de#artment ;+555 G 27.55< 27555

6aterials ;+555 G 5.40 G 2.5< +3+3

Labor ;+555 G 5.40 G 2+.85< =3

actory o"erhead ;+555 G 5.40 G 25.9< 457 3793

-------- -------

>otal cost acco%nted $or 24393


7/16

[email protected]

dditional Com#%tations

E&%i"alent %nits o$ #rod%ction:

6aterials labor and $actory o"erhead 7555 F ;+555 40A< 7405 %nits

Dnits in Process E&%i"alent

5A *ere 75A com#lete 5.05



--------

>otal 5.40

,

5A o$ +555 %nits 75A 055 %nits

05A o$ +555 %nits 45A 35 %nits

45A o$ +555 %nits 05A 35 %nits

>otal 405 %nits

7. E&%i"alent Dnits o$ Prod%ction:

/%ring #ril 05555 %nits *ere trans$erred in $rom de#artment at a cost o$

249555. 6aterials cost o$ 2355 and con"ersion cost o$ 29555 *ere added in

de#artment N. n #ril 45 de#artment N had 555 %nits o$ *ork in #rocess 35A

com#lete as to con"ersion as costs. 6aterials are added in the beginning o$ the

#rocess in de#artment N.

,e&%ired:

E&%i"alent %nits o$ #rod%ction calc%lation.

>he cost #er e&%i"alent %nit $or con"ersion costs.

Sol%tion:


8/16

[email protected]

;+< %antity Sched%le:


Dnits trans$erred to nished goods +555Dnits still in #rocess 555 05555

--------

E&%i"alent Prod%ction:

>rans$erred in

$rom/e#artment

6aterials Con"ersion

>rans$erred to nished goods +555 +555 +555

Ending in"entory 555 555 4555

------- -------- -------

05555 05555 05555

;0< cost #er e&%i"alent %nit $or con"ersion costs:

29555 J +8555 25.5 #er %nit

. Costing o$ Dnits >rans$erred %t? bnormal Loss

/%ring ebr%ary the ssembly de#artment recei"ed 35555 %nits $rom C%tting

de#artment at a %nit cost o$ 24.7. Costs added in the ssembly de#artment *ere:

materials 27+35? labor 2+5+=55? and $actory o"erhead. 2355. >here *as no

beginning in"entory. $ the 35555 %nits recei"ed 5555 *ere trans$erred o%t?

9555 %nits *ere in #rocess at the end o$ the month ;all materials 0J4 con"erted


9/16

[email protected]


or the month o$ #ril +9OBBBB

%antity Sched%le:



Dnits still in #rocess ;ll materials - 0J4 labor and o"erheadotal cost added 2+9985 24.5

-------- ------

>otal cost to be acco%nted $or 27+005 2=.57


>rans$erred to next de#artment ;5555 G 2=.57< 240555

>rans$erred to actory "erhead:

rom #receding de#artment ;+555 G 24.7< 2475

6aterials ;+555 G +J0 G 25.=5< 45


10/16

[email protected]

Labor ;+555 G +J0 G 2+.85< 955

actory o"erhead ;+555 G +J0 G 2+.55< 55 095

--------

'ork in #rocess - ending in"entory: Cost $rom #receding de#artment ;9555 G 24.7< 24+835

6aterials ;9555 G 5.=5< 3455

Labor ;9555 G 0J4 G +.85< +5855

actory o"erhead ;9555 G 0J4 G +.55< 3555 7935

-------- -------

>otal cost acco%nted $or 27+005



6aterials 5555 F 9555 F +555J0 lost %nits 955 %nits

Labor and $actory o"erhead 5555 F ;9555 G 0J4< F +555J0 lost %nits 355

Dnit Cost:

6aterials 27+35 J 955 25.=5 #er %nit

Labor 2+5+=55 J 355 2+.85 #er %nit

actory o"erhead 2355 J 355 2+.55 #er %nit

3. Cost o$ Prod%ction ,e#ort? Hormal and bnormal Loss:

>he Sterling Com#any %ses #rocess costing. In de#artment N con"ersion costs areinc%rred %ni$ormly thro%gho%t the #rocess. 6aterials are added at the end o$ the

#rocess $ollo*ing ins#ection. Hormal s#oilage is ex#ected to be A o$ good o%t#%t.

>he $ollo*ing in$ormation related to de#artment N $or 1an%ary:


11/16

[email protected]

Dnits /ollars

,ecei"ed $rom de#artment +0555 287555

>rans$erred to nished goods 9555

Ending in"entory ;=5A com#lete< 0555Cost inc%rred:

6aterials +8555

Labor and $actory o"erhead 7355

Required:Cost o$ Prod%ction re#ort $or de#artment N.

Sol%tion:

>he Sterling Com#any

/e#artment N


or the month o$ 1an%ary

%antity Sched%le:

Dnits recei"ed $rom #receding de#artment +0555

Dnits trans$erred to nished goods 9555

Dnits still in #rocess 0555

Dnits lost in #rocess ;Hormal S#oilage 9555 G A< 75

Dnits lost in #rocess ;bnormal S#oilage +555 - 75< 5 +0555

-------



>rans$erred in d%ring the month ;+0555 %nits< 287555 2=.55

-------- ------


6aterials 2+8555 20.55


12/16

[email protected]

Labor and $actory 5"erhead 27355 27.55

-------- ------

>otal cost added 234355 23.55

-------- ------>otal cost to be acco%nted $or 2+7=355 2+4.55


>rans$erred to nished goods K;9555 G 2+4< F ;75MG 2++rans$erred to actory "erhead ;5MM G 2++< 355


Cost $rom #receding de#artment ;0555 G 2=.55< 2+7555

Labor and $actory o"erhead ;0555 G =5A G 27< 355 +9355

-------- -------

>otal cost acco%nted $or 2+7=355

MHormal s#oilage

MMbnormal s#oilage



6aterials 9555 %nits

Labor and $actory o"erhead 9555 F ;0555 =5A< F 75 F 5

Dnit Costs:

6aterials 2+8555 J 9555 20.55 #er %nit

Labor and $actory o"erhead 27355 J ++755 27.55 #er %nit

=. Cost o$ Prod%ction ,e#ort? S#oiled Dnits - Hormal and bnormal:

)ettinger Inc. %ses #rocess costing system in its t*o #rod%cing de#artments. In

de#artment 0 ins#ection takes #lace at the 93A stage o$ com#letion a$ter *hich


13/16

[email protected]

materials are added to good %nits. s#oilage rate o$ 4A o$ good o%t#%t is

considered normal.

/e#artment 0 records $or #ril sho*s:

,ecei"ed $rom de#artment + 45555 %nits

cost 2+4555

6aterials 2+055

Con"ersion cost ;labor F $actory o"erhead< 2+49475

>rans$erred to nished goods 0555 %nits

Ending *ork in #rocess in"entory ;5A com#lete< 7055 %nits

Required:Cost o$ #rod%ction re#ort.

Sol%tion:

>he Sterling Com#any

/e#artment N


or the month o$ 1an%ary

%antity Sched%le:


Dnits trans$erred to nished goods 0555

Dnits still in #rocess ;5A com#lete< 7055

Dnits lost in #rocess ;Hormal S#oilage 0555 G 4A< =5

Dnits lost in #rocess ;bnormal S#oilage 855 - =5< 5 45555

-------



>rans$erred in d%ring the month ;45555 %nits< 2+4555 27.5

-------- ------



14/16

[email protected]

6aterials 2+055 25.5

Labor and $actory 5"erhead ;Con"ersion cost< 2+49475 2.55

-------- ------

>otal cost added 2++875 2.5 -------- ------

>otal cost to be acco%nted $or 2083875 2+5.55


>rans$erred to nished goods:

Cost o$ com#leted %nits ;0555 G 2+5.55< 205555

Hormal s#oilage - all related to %nits trans$erred to nishedgoods:

Cost $rom #receding de#artment ;=5 G 27.5< 44=

Con"ersion cost ;=05 G 2.55< 4355 2039=

--------

>rans$erred to actory "erhead - bnormal s#oilage:

Cost $rom #receding de#artment ;5 G 27.5< 200

Con"ersion cost ;78 G 2.55< 075 73

--------


Cost $rom #receding de#artment ;7055 G 27.5< 2+8955

Labor and $actory o"erhead ;0+55 G 2< +555 09755

-------- -------

>otal cost acco%nted $or 2083875



6aterials 0555 %nits


15/16

[email protected]

Labor and $actory o"erhead 0555 F ;7055 G 5A< F ;=5 G 93A< F ;5 G

93A

Process Costing System

Documents